Question

Clark Co.'s advertising expense account had a balance of $146,000 at December 31, 20X3, before any necessary year-end adjustment relating to the following: • Included in the $146,000 is the $15,000 cost of printing catalogs for a sales promotional campaign in January 20X4. • Radio advertisements broadcast during December 20X3 were billed to Clark on January 2, 20X4. Clark paid the $9,000 invoice on January 11, 20X4. What amount should Clark report as advertising expense in its Income Statement for the year ended December 31, 20X3? $122,000 $131,000 $140,000 $155,000

Answer 1

the amount of $ 140,000 should Clark report as advertising expense in its Income Statement for the year ended December 31, 20X3

Since $ 15000 (cost of printing catalogs for sales promotion) is related to January 20X4, therefore it must be subtracted from $ 146,000 as $ 15,000 is prepaid expenses

Also, radio advertisements broadcast expense $ 9,000 which is related to December 20X3 but paid in 20X4 must be added to 20X3's advertisement expense account ie $ 146,000 as $ 19,000

therefore, amount to be reported as advertisement expense in its Income Statement for the year ended December 31, 20X3 = $ (146,000 - 15,000 + 9,000) = $ 140,000